Rupee falls 24 paisas in interbank market

KARACHI: The rupee fell 24 paisas against the dollar on Thursday in the interbank foreign exchange market, despite shrinking current account deficit, dealers said.

The local currency ended at Rs229.15 to the dollar from the previous day’s closing of Rs228.91 in the interbank foreign exchange market.

The dealers said the market ignored the contraction in the current account deficit because of high demand for import payments.

A day ago, the State Bank of Pakistan (SBP) said that the current account deficit narrowed to $3.67 billion in the first six months (July-December) of the fiscal year 2022/23.

The current account deficit was recorded at $9.1 billion in the same months of the last fiscal year, showing the current account deficit narrowed 59 per cent during the period under review.

The dealers said the demand for the foreign currency increased because of SBP Governor Jameel Ahmad’s hint to allow clearance of the stuck up consignments at ports.

The SBP governor said that the central bank would strive to clear the backlog of approximately 11,000 cases.

The pressure on the rupee also came, as the local authorities failed to convince the International Monetary Fund (IMF) for continuation of the loan programme under the Extended Fund Facility (EFF).

The IMF flows are necessary because other lending agencies believe that the programme guarantees their funding.

The delay in the IMF programme also adversely affected the stocks of the foreign exchange reserves of the country.

The official foreign exchange reserves of the SBP fell to only $4.34 billion by the week ended January 6, 2023. The SBP’s forex reserves fell $1.233 billion from the level of $5.576 billion on December 30, 2022.

The current level of the official forex reserves fell below one month’s import cover. The import bill of the country for December 2022 was recorded at $5.16 billion, according to the Pakistan Bureau of Statistics (PBS).

The benchmark foreign exchange reserves of a central bank should be at a level to provide three months import cover.

The foreign exchange reserves held by the central bank witnessed a record high of $20.146 billion by the week ended August 27, 2021. Since then, the official forex reserves of the SBP dropped $16.803 billion.

Due to this shortage, the banks were unable to open the letters of credit (LCs) for import payments.

The rupee fell to the all-time low level of Rs239.94 to the dollar on July 28, 2022.

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